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TMI Blog2021 (4) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the company of the director. The assessee has also alleged that the AO has not calculated the reserves and surplus on the date of advance to the directors and he has taken closing balance of reserves and surplus as at the end of the year i.e. 31/03/2006, which is not correct and while calculating the reserves and surplus, depreciation as per the IT Act has also not been calculated by the AO. It was the duty of the assessee to prove that on the date of advance the assessee must calculate the reserves and surplus, which has not done by the assessee. In regard to Reserves Surplus , it should be read in general terms as used in the IT Act. The payer is a company and the financial statements are prepared as per the Companies Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 1420/Hyd/2016 and the grounds raised in this appeal, which are common in both the appeals, are as under: 1. The CIT (A) erred in not appreciating the contention of the assessee that he is not the real recipient of the money/did not derive any benefit from out of transaction/did not derive any indirect benefit from the transaction/that the company and another shareholder with substantial holding are the real beneficiaries of the transaction. 2, The CIT (A) erred in treating the company as having allocable profits/surplus to declare dividends at the point of alleged loan/advance to the director. 3. The CIT (A) erred in not appreciating the point raised by the assessee that the company cannot validly declare any dividen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons mentioned as under: During the course of scrutiny proceedings for AY 2007-08 in case of M/s Kalanikethan Textiles and Jewels Pvt. Ltd., it was observed that assessee has drawn an amount of ₹ 28,52,612/- from company over and above his credit balance. M/s Kalanikethan Textiles and Jewels Pvt. Ltd., in which assessee is a director and held 31/7% of shares is closely held company in which public are not substantially interested. Reserves and surplus of company for the year under consideration are ₹ 1,14,79,654/-. In view of provisions of section 2(22)(e) of IT Act excess amount withdrawn ₹ 28,52,612/- is in the nature of deemed dividend, taxable in hands of assessee for AY 2006-07. 2.1 Accordingly, notice u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lot of trouble to the company and Its working. Further Section 2(22)(e) is not Applicable to the facts of the case and the amount should not be assessed In my personal case. 4.2. After considering the submissions of the assessee and referring to the provisions of section 2(22)(e) of the Act, the AO held that as the assessee is having substantial interest in M/s Kalanikethan Textiles and Jewels Pvt. Ltd., i.e. more than 10% shareholding, the amount withdrawn of ₹ 28,52,612/- from the above company over and above his credit balance, is treated as deemed dividend u/s 2(22)(e) of the Act in the hands of the assessee and accordingly added back the same to the total income of the assessee. 5. When the assessee preferred an appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere book entry and no physical amounts were transferred in to the accounts of the assessee. He submitted that there is also prohibition for buy-back of shares of the own company and, therefore, the amount was debited to the accounts of the appellants. In support of his arguments, the ld. AR relied on the judgments, which are placed in the paper book at pages 1 to 64. 8. Ld. DR, on the other hand, relied on the orders of the authorities below and submitted that the CIT(A) has rightly upheld the action of the AO after calling remand report from the AO and considering the entire submissions made by the assessee as well as the case law relied upon by the ld. AR before him, the amount confirmed by the CIT(A) is under the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any has also debited to the current account as maintained by the company of the director. The AR of the assessee has also alleged that the AO has not calculated the reserves and surplus on the date of advance to the directors and he has taken closing balance of reserves and surplus as at the end of the year i.e. 31/03/2006, which is not correct and while calculating the reserves and surplus, depreciation as per the IT Act has also not been calculated by the AO. It was the duty of the assessee to prove that on the date of advance the assessee must calculate the reserves and surplus, which has not done by the assessee. In regard to Reserves Surplus , it should be read in general terms as used in the IT Act. The payer is a company and the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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